Options Brief - Volatility Cools, Earnings Heat Up
Date: 10 July 2026
Author: Koen Hoorelbeke, Investment and Options Strategist
Summary
On Thursday, a rally led by chipmakers significantly reduced the volatility spike caused by geopolitical tensions and Federal Reserve concerns earlier in the week. The VIX indices, which measure market volatility, experienced a notable decline, indicating a reset in market sentiment as we approach a busy earnings season.
Market Overview
The current market regime is characterized as a low-volatility bull, with the VIX at 15.84 and a term structure in contango. The volatility spike from earlier in the week has unwound quickly, with the spot VIX dropping 6.3% and the VIX1D falling 20%. This broad-based volatility reset is not limited to equities but extends to commodities like oil and gold.
The S&P 500 rose by 0.81% to 7,543.64, driven by renewed optimism in AI demand, particularly in semiconductor stocks. Major players like Meta and Tesla saw significant gains, while the Dow Jones Industrial Average increased modestly by 0.3%.
Interest rates also eased, with the 10-year yield falling to 4.54% and the 30-year yield settling around 5.06%. The MOVE index, which measures bond market volatility, decreased by 4.9%.
Earnings Season Insights
The earnings season is set to kick off with Delta Air Lines reporting today, followed by State Street and other financials starting from 16 July. The implied volatility for single stocks is already elevated, particularly for Micron, which has a one-month at-the-money implied volatility above 100.
Market expectations for Q2 growth are optimistic, with organic sales growth projected to average around 6%, up from 4% in Q1. Investors will be closely monitoring guidance for Q3, consumer trends in the US and China, and any impacts from AI-driven demand.
Market Sentiment and Options Flow
Options flow sentiment indicates a mixed positioning among mega-cap stocks, with a focus on deep-in-the-money structures suggesting stock-replacement strategies rather than outright bullish bets. The overall sentiment remains cautious, with a put-heavy index and ETF flow.
The VIX term structure shows a typical upward slope after a brief inversion, while the CBOE SKEW remains elevated, indicating ongoing demand for downside protection despite the recent decline in volatility.
Conclusion
The rapid unwinding of the volatility premium earlier this week suggests a market that is recalibrating rather than signaling a return to calm. As we head into a busy earnings period, the options market is pricing in a relatively quiet interlude, but the geopolitical and economic risks remain present. Investors should remain vigilant as the market dynamics evolve.